1. © 2013, published by Flat World Knowledge 11-1 Information Systems: A Manager’s Guide to Harnessing Technology, version 2.0 John Gallaugher

2. © 2013, published by Flat World Knowledge Published by: Flat World Knowledge, Inc. © 2013 by Flat World Knowledge, Inc. All rights reserved. Your use of this work is subject to the License Agreement available here http://www.flatworldknowledge.com/legal. No part of this work may be used, modified, or reproduced in any form or by any means except as expressly permitted under the License Agreement.http://www.flatworldknowledge.com/legal 11-2

3. © 2013, published by Flat World Knowledge Chapter 11 Software in Flux: Partly Cloudy and Sometimes Free 11-3

4. © 2013, published by Flat World Knowledge Learning Objectives Understand how low marginal costs, network effects, and switching costs have combined to help create a huge and important industry Recognize that the software industry is undergoing significant and broadly impactful change brought about by several increasingly adopted technologies including open source software, cloud computing, and software as a service 11-4

5. © 2013, published by Flat World Knowledge Software Industry Marginal cost: Cost of producing one more unit of a product – Is effectively zero to produce an additional copy of a software product Network effects and switching cost can offer a degree of customer preference and lock in Open source software (OSS): Software that is free and where anyone can look at and potentially modify the code 11-5

6. © 2013, published by Flat World Knowledge Software Industry Cloud computing: Replacing computing with services provided over the Internet – Software as a service (SaaS): Firm subscribes to a third-party software and receives a service that is delivered online Virtualization: Technology that can make a single computer behave like many separate computers – Helps consolidate computing resources and creates additional savings and efficiencies 11-6

7. © 2013, published by Flat World Knowledge Learning Objectives Define open source software and understand how it differs from conventional offerings Provide examples of open source software and how firms might leverage this technology 11-7

8. © 2013, published by Flat World Knowledge Open Source Software Linux: Open source software operating system Source code for OSS products - Openly shared – Can be changed and redistributed by anyone In stark contrast to the practice of conventional software firms who: – Treat their intellectual property as closely guarded secrets – Almost never provide the source code for their commercial products 11-8

9. © 2013, published by Flat World Knowledge Open Source Software Seen as a threat by some firms undermining their economic model LAMP: Acronym for Linux, Apache Web server software, MySQL database, and Perl/Python/PHP – Powers many of the sites visited each day from Facebook to YouTube 11-9

10. © 2013, published by Flat World Knowledge Learning Objectives Know the primary reasons firms choose to use OSS Understand how OSS can beneficially impact industry and government 11-10

11. © 2013, published by Flat World Knowledge Why Open Source? Cost Reliability Security – Security focused: Technology products that contain particularly strong security features Scalability: Ability to either handle increasing workloads or to be easily expanded to manage workload increases Agility and time to market 11-11

12. © 2013, published by Flat World Knowledge Learning Objectives Recognize that just about every type of commercial product has an open source equivalent Be able to list commercial products and their open source competitors 11-12

13. © 2013, published by Flat World Knowledge Examples of Open Source Software Firefox OpenOffice Gimp Alfresco Marketcetera Zimbra MySQL, Ingres, and PostgreSQL 11-13 HBase and Cassandra SugarCRM Asterix Free BSD and Sun’s OpenSolaris

14. © 2013, published by Flat World Knowledge Learning Objectives Understand the disproportional impact OSS has on the IT market Understand how vendors make money on open source Know what SQL and MySQL are 11-14

15. © 2013, published by Flat World Knowledge Impact of OSS on the IT Market Lowers the cost of computing and makes computing options accessible to smaller firms Reliable, secure, and lowers computing costs for all users Diverts funds that can be used for other competitive initiatives and encouraging innovation 11-15

16. © 2013, published by Flat World Knowledge Business of Open Source Vendors make money on OSS by selling support and consulting services Industry’s evolution (standards competition) – Pre-Linux days - Almost every major hardware manufacturer made its own incompatible version of the Unix operating system They had difficulty attracting third-party vendors to write application software – Now all major hardware firms run Linux resulting in a large, unified market attracting software developers 11-16

17. © 2013, published by Flat World Knowledge Linux on a Desktop Linux is common on mobiles, consumer electronics, and on enterprise solutions, but not on desktop computers – It is not easy to install – This complexity can raise the total cost of ownership Total cost of ownership (TCO): All costs associated with the design, development, testing, implementation, documentation, training and maintenance of a software system 11-17

18. © 2013, published by Flat World Knowledge MySQL SQL stands for structured query language – Structured query language: Language for creating and manipulating databases Dominant open source database software product Adoption of the SQL standard eases some issues with migrating from commercial products to MySQL 11-18

19. © 2013, published by Flat World Knowledge Learning Objectives Understand the concept of cloud computing Identify the two major categories of cloud computing 11-19

20. © 2013, published by Flat World Knowledge Categories of Cloud Computing Software as a service (SaaS) Utility computing: Firm develops its own software and then runs it over the Internet on a service provider’s computers – Variants Platform as a service (PaaS) Infrastructure as a service (IaaS) 11-20

21. © 2013, published by Flat World Knowledge Cloud Computing Private clouds: Pools of computing resources that reside inside an organization and that can be served up for specific tasks as need arrives Evolution of cloud computing has huge implications across the industry – Financial future of hardware and software firms – Cost structure and innovativeness of adopting organizations – Skill sets likely to be most valued by employers 11-21

22. © 2013, published by Flat World Knowledge Learning Objectives Know how firms using SaaS products can dramatically lower several costs associated with their information systems Know how SaaS vendors earn their money Be able to list the benefits to users that accrue from using SaaS Be able to list the benefits to vendors from deploying SaaS 11-22

23. © 2013, published by Flat World Knowledge Earning Money Through SaaS Money can be earned via a usage-based pricing model similar to a monthly subscription Other SaaS firms: – Offer free services that are supported by advertising – Promote the sale of upgraded or premium versions for additional fees – Compete directly with the biggest names in software 11-23

24. © 2013, published by Flat World Knowledge Benefits of SaaS to Users Lower costs and financial risk mitigation Faster deployment times and variable operating expense Scalable systems Higher quality and service levels Remote access and availability 11-24 Limits development to a single platform Tighter feedback loop Ability to instantly deploy bug fixes and product enhancements Lower distribution costs Greater accessibility Reducing software piracy

25. © 2013, published by Flat World Knowledge Learning Objectives Be able to list and appreciate the risks associated with SaaS 11-25

26. © 2013, published by Flat World Knowledge Risks Associated with SaaS Dependence on a single vendor Concern about the long-term viability of partner firms Users may be forced to migrate to new versions – Possibly incurring unforeseen training costs and shifts in operating procedures Reliance on a network connection which may be slower, less stable, and less secure 11-26

27. © 2013, published by Flat World Knowledge Risks Associated with SaaS Data asset stored off-site may lead to security and legal concerns Limited configuration, customization, and system integration options compared to packaged software or alternatives developed in-house User interface of Web-based software is less sophisticated and lacks the richness of most desktop alternatives Ease of adoption may lead to pockets of unauthorized IT being used throughout a firm 11-27

28. © 2013, published by Flat World Knowledge Learning Objectives Distinguish between SaaS and hardware clouds Provide examples of firms and uses of hardware clouds Understand the concepts of cloud computing, cloudbursting, and black swan events Understand the challenges and economics involved in shifting computing hardware to the cloud 11-28

29. © 2013, published by Flat World Knowledge Hardware Cloud Makes computing resources such as hardware and storage, along with infrastructure management, available to a customer on an as-needed basis Service provider charges for specific resource usage rather than a flat rate In the past, similar efforts have been described as utility computing, hosting, or time sharing 11-29

30. © 2013, published by Flat World Knowledge Hardware Cloud Cloud computing efforts focus on providing a virtual replacement for operational hardware like storage and backup solutions SaaS provides the software and hardware to replace an internal information system – Hardware cloud means replacing computing hardware with a service provided by a third party online 11-30

31. © 2013, published by Flat World Knowledge Hardware Cloud Salesforce.com offers Force.com – Includes several cloud-supporting tools to write applications specifically tailored for Web-based delivery Google’s App Engine offers developers several tools – Including a database product called Big Table Microsoft offers Windows Azure 11-31

32. © 2013, published by Flat World Knowledge Hardware Cloud Platform as a service (PaaS): Cloud providers offer services that are used by customers to build their own applications on the provider’s infrastructure – Services - Hardware, operating system, tools, and hosting Infrastructure as a service (IaaS): Cloud providers offer services that include running the remote hardware and networking – Client firms can choose the software used 11-32

33. © 2013, published by Flat World Knowledge Clouds in Action Use of cloud computing to provide excess capacity during periods of spiking demand It is a scalability solution that is provided as an overflow service, kicking in as needed Cloudbursting Events that cannot be predicted but can cause an impact Scalable computing resources can help a firm deal with spiking impact from Black swan events Black swans 11-33

34. © 2013, published by Flat World Knowledge Challenges Remain Installing a complex set of systems on someone else’s hardware is very difficult Firms considering cloud computing need to do a thorough financial analysis Firms should enter the cloud cautiously, particularly where mission-critical systems are concerned 11-34

35. © 2013, published by Flat World Knowledge Learning Objectives Understand how cloud computing’s impact across industries is proving to be broad and significant Know the effects of cloud computing on high-end server sales and the influence on the trend shifting from hardware sales to service Know the effects of cloud computing on innovation and the influence on the changes in the desired skills mix and job outlook for IS workers 11-35

36. © 2013, published by Flat World Knowledge Learning Objectives Know that by lowering the cost to access powerful systems and software, cloud computing can decrease barriers to entry Understand the importance, size, and metrics of server farms 11-36

37. © 2013, published by Flat World Knowledge Clouds and Tech Industry Impact Shifting to cloud computing modifies the margin structure for many in the computing industry Cloud computing can accelerate innovation – Changes the desired skills mix and job outlook for IS workers – Enables organizations to spend less on hardware infrastructure and reinvest in strategic efforts and innovation Firms need to think about the strategic advantages that can be created 11-37

38. © 2013, published by Flat World Knowledge Server Farm Massive network of computer servers running software to coordinate their collective use – Provide the infrastructure backbone to SaaS, hardware cloud efforts, and many large-scale Internet services – Require plenty of cheap land, low-cost power, ultrafast fiber-optic connections, and benefit from mild climates – Sun, Microsoft, IBM, and HP have all developed rapid- deployment server farm modules 11-38

39. © 2013, published by Flat World Knowledge Learning Objectives Know what virtualization software is and its impact on cloud computing Be able to list the benefits to a firm from using virtualization 11-39

40. © 2013, published by Flat World Knowledge Virtualization Allows a single computer or cluster of connected computers to function as if it were several different computers – Each computer runs its own operating system and software Can be used in-house to reduce an organization’s hardware needs Can generate huge savings Can create a firm’s own private cloud of scalable assets 11-40

41. © 2013, published by Flat World Knowledge Virtualization Can cut energy consumption and lower carbon footprint Firms can buy and maintain fewer servers Can power down servers until demand increases Virtual desktops: Running an instance of a PC’s software on another machine and delivering the image of what is executing to the remote device – Allow firms to scale, back up, secure, and upgrade systems far more easily than if they had to maintain each individual PC 11-41

42. © 2013, published by Flat World Knowledge Learning Objectives Know the options managers have when determining how to satisfy the software needs of their companies Know the factors that must be considered when making the make, buy, or rent decision 11-42

43. © 2013, published by Flat World Knowledge Variables to Consider for Technology Decisions Competitive advantage Security Legal and compliance requirements Skill, expertise, and available labor Cost and timeVendor issues 11-43